Back in December 2006, I wrote a blog post titled The Next Big Trust Scandal. After listing the scandals du jour (remember those quaint days of outrage over options backdating?), I suggested a case could be made for executive compensation. I wrote:

"While CEO compensation is massive, and could make a difference if redeployed, the real issue is the cost we pay as a society when institutions are seen to have tweaked data, kept information secret, and in various ways loaded the dice—all the while claiming not to be doing so.
We are all creditors to a system based on trust; and we’re all left holding the bag when some players default on that trust. Trust betrayed is trust eroded. Let’s start letting in some sunshine."

"The former CEOs expressed no remorse for their actions that drove AIG into the arms of the government and didn’t acknowledge making any mistakes. Rather, they blamed the accounting. The House committee members were visibly disturbed by the sheer audacity of these so-called corporate leaders…It’s clear that there are numerous practices that need fixing and right now, Corporate America doesn’t seem capable of doing it on its own.
…Exhibit A is excessive executive compensation…I believe the reason that the government’s daily solutions to the credit crunch are not working is because the trust within our system has evaporated.
…Without true leadership – setting the proper tone at the top and taking responsibility – I don’t think this market will turn around. To start down the path to true leadership, CEOs can start by voluntarily reining in their excessive pay packages."

Romanek suggests we have seen the failure of board-centric management; boards have simply failed to do the job of reigning in rogue compensation philosophies. As an alternative, he identifies shareholder-centric approaches. I’m not sure what that means—shareholder online voting on exec compensation? Hey, you never know.

Execs may think the driving issue here is some agitation by the hoi polloi about the distribution of wealth, egged on by “leftist” elements. They may think that the issue is the ratio of CEO-to-lowest level pay, and that it can be handle by good PR.

But the problem isn’t egalitarianism. In the US, we’ve always valued meritocracy more highly than equality. The anger goes deeper than that.
It goes to hypocrisy. Which means lying. Which almost always means the pursuit of self-interest at the expense of others. And that nearly all people find hard to abide.

As I wrote nearly back then:

While CEO compensation is massive, and could make a difference if redeployed, the real issue is the cost we pay as a society when institutions are seen to have tweaked data, kept information secret, and in various ways loaded the dice—all the while claiming not to be doing so.
We are all creditors to a system based on trust; and we’re all left holding the bag when some players default on that trust. Trust betrayed is trust eroded. Let’s start letting in some sunshine.

The killer of institutional trust is not the existence of those who made it rich by achieving the American Dream (or any other dream); it’s people who will piss on you and tell you it’s raining.